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LONDON BRIEFING: UK retail sales up; Hunt "comfortable" with recession

26th May 2023 07:57

(Alliance News) - Stocks in London are expected to kick off the final trading day of a fraught week with a minor gain, though US debt ceiling uncertainty continues to temper sentiment.

President Joe Biden declared Thursday the US would avoid a disastrous credit default, even as lawmakers went on a 10-day break without a deal on raising the nation's borrowing limit to keep paying the bills.

There are seven days until June 1 – the earliest possible point when the government estimates it could run out of money to service its debts – and missed loan repayments would likely spark a downturn, roiling world markets.

In local economic news on Friday, UK retail sales edged up on a monthly basis in April, while an annual decline softened, according to the Office for National Statistics. Meanwhile, the UK's chancellor reaffirmed his support for the Bank of England's monetary policy moves.

On the corporate side, IAG's British Airways flights at Heathrow were disrupted by a technical issue on Thursday, while AstraZeneca shared some positive clinical trial results. IntegraFin reported weaker half-year earnings, as well as a slowdown in net inflows at its Transact arm.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: called up 14.5 points, 0.2%, at 7,585.37

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Hang Seng: financial markets in Hong Kong closed for Buddha Day

Nikkei 225: closed up 0.4% at 30,916.31

S&P/ASX 200: closed up 0.2% at 7,154.80

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DJIA: closed down 35.27 points, 0.1%, at 32,764.65

S&P 500: closed up 0.9% at 4,151.28

Nasdaq Composite: closed up 1.7% at 12,698.09

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EUR: up at USD1.0737 (USD1.0723)

GBP: up at USD1.2337 (USD1.2330)

USD: down at JPY139.74 (JPY139.85)

Gold: up at USD1,949.11 per ounce (USD1,945.11)

Oil (Brent): largely flat at USD76.18 a barrel (USD76.15)

(changes since previous London equities close)

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ECONOMICS

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Friday's key economic events still to come:

08:30 EDT US personal consumption expenditures

10:00 EDT US University of Michigan survey of consumers

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UK retail sales edged up on a monthly basis in April, while an annual decline softened, according to the Office for National Statistics on Friday. The ONS estimated that retail sales volumes in April rose 0.5% from the previous month, after a downwardly revised fall of 1.2% in March. The reading was slightly higher than FXStreet-cited market consensus of 0.3%. On an annual basis, retail sales volumes fell 3.0% in April, compared to a downwardly revised fall of 3.9% in March. Market consensus had expected a 2.8% fall in April, while March was initially reported as a 3.1% decline.

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UK Chancellor Jeremy Hunt said he is "comfortable" with the UK falling into a recession, if that's what is needed to tackle elevated inflation, according to Sky News. "If we want to have prosperity, to grow the economy, to reduce the risk of recession, we have to support the Bank of England in the difficult decisions that they take," Hunt told Sky News. As chancellor, Hunt said he has to make "difficult decisions" to balance the UK's books, "so that the markets, the world can see that Britain is a country that pays its way". "All these things mean that monetary policy at the Bank of England (and) fiscal policy by the chancellor are aligned," Hunt added.

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BROKER RATING CHANGES

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Berenberg raises Sabre Insurance to 'buy' (hold) - price target 153 (93) pence

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RBC cuts Halfords Group to 'sector perform' (outperform) - price target 220 (230) pence

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Morgan Stanley raises Rio Tinto to 'overweight' - price target 5,800 pence

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COMPANIES - FTSE 100

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International Consolidated Airlines unit British Airways has apologised after an IT issue caused the cancellations of domestic and European flights on Thursday, as Britain heads into the Bank Holiday weekend. There were more than 50 cancelled British Airways flights departing Heathrow on Thursday, with the airline urging passengers to check their flight status before going to the airport on Friday. There were more than 20 flights that had been cancelled or still currently delayed that were meant to land at Heathrow on Thursday. Some flights that are due to depart Friday evening have been notified their flights are delayed, adding to the stress for customers.

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AstraZeneca reported positive high-level results from this DUO-E phase III trial into treatment for endometrial cancer. The trial looked at Imfinzi in combination with platinum-based chemotherapy, followed by either Imfinzi and Lynparza or Imfinzi alone as a maintenance therapy. The treatment "demonstrated a statistically significant and clinically meaningful improvement in progression-free survival compared to standard-of-care chemotherapy alone in patients with newly diagnosed advanced or recurrent endometrial cancer," Astra said.

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COMPANIES - FTSE 250

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IntegraFin reported on its half-year ended March 31, with revenue little changed year-on-year at GBP66.5 million, compared to GBP67.0 million. Pretax profit slipped 12% to GBP27.9 million from GBP31.7 million. The Transact investment platform owner said net inflows there amounted to GBP1.6 billion, slowing from GBP2.7 billion a year before, though client numbers rose 4.1% year-on-year to a record of 228,232 from 218,787. The firm said the cost guidance provided in December remains unchanged. It maintained its interim dividend payout at 3.2 pence per share. "The digitalisation programme for the Transact platform is well underway and is being positively received. The recruitment of IT and software professionals is progressing well, though at a slower pace than originally planned, whilst the market for IT professionals remains competitive," it said.

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Asos late Thursday announced plans to boost its balance sheet through a new long-term GBP275 million financing facility alongside a GBP75 million placing as it continues to restructure the business. The online fashion retailer said the new capital structure provides increased flexibility and simplicity under a single lender. Asos has entered into a GBP200 million senior term loan and a GBP75 million super senior revolving facility with specialist lender Bantry Bay Capital through to April 2026, which will replace the existing GBP350 million revolving credit facility which was due to expire in November 2024. The GBP75 million placing will be priced at 418.1 pence and there will be a separate retail offer of up to GBP5 million. Back in October, Asos announced a turnaround plan. It said it would look to improve inventory management, reduce its costs and "reinforce" its leadership team and culture. The plan was one of Jose Calamonte's first acts as chief executive. But some City analysts felt a fundraise would be required to get the ball rolling.

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OTHER COMPANIES

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AIM-listed digital publisher XLMedia warned that it expects current softness in the market to persist into the early summer. Despite a "strong start" to the first quarter in the US, it expects first-half revenue to fall behind the prior year - which had benefitted from the launch of online sports betting in New York. "The launch of online sports betting in Massachusetts in mid-March, after the NFL season ended, while solid, did not see the spike in revenues normally seen on a state launch," it said. The acquisition spend by operators in the first half is not comparable with the previous year, XLMedia noted, with "less generous" promotions available to attract new customers. It said trading in Europe has been in line with expectations, supported by the Cheltenham and Aintree horse racing festivals in the UK. It will update further on the first half in late-July.

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Paris police fired tear gas to disperse climate protesters trying to block an annual general meeting of French oil firm TotalEnergies. After giving three warnings on loudhailers, officers used tear gas on the activists, who sat on the road outside the meeting venue in an upscale Paris district, in a bid to stop people entering. Dozens of protesters had converged around the Salle Pleyel venue from dawn, in a protest called by a coalition of non-governmental organisations. They chanted slogans such as "All we want is to knock down Total" and "One, two and three degrees, we have Total to thank".

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By Elizabeth Winter, Alliance News senior markets reporter

Comments and questions to [email protected]

Copyright 2023 Alliance News Ltd. All Rights Reserved.

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